Rebecca Howard: Pet food treat for King Salmon

The more than US$2 billion ($3.2b) Chinese pet food market is tipped to grow about 10 per cent annually. Photo / 123RF

Opinion

It used to be buried or rendered into fish meal.

But today, King Salmon's small but growing foray into pet food retails for $252.40 a kilo.

"It was pretty obvious there was very good nutrient potential in the heads, brains, skin and trimmings. People don't want to eat it, but man, cats and dogs can't get enough," said Simon Thomas, divisional manager for Omega Innovations.

Charlie Alpha Tango, a black cat in Wellington, is proof. He buried his face in the tin and didn't look up until every scrap was gone.

Charlie hasn't tried the freeze-dried baby salmon treats yet, but Thomas said they are one of King Salmon's most expensive products. The final purchaser pays $20.40 for an 80-gram pack on average.

"Previously there wasn't even an outlet for this product," he said.

The company - best known for its high-margin Pacific Chinook variety – saw potential five years ago in what was previously considered waste.

"We realised very early on – and it didn't take a rocket scientist – where there is nutrient potential there is also financial potential.

"What you have to do is be able to capture that potential and maintain it in a quality that can be used."

Thomas said the firm spoke to several pet food manufacturers, including some they already supply. When no-one stepped up, they launched their own brand - Omega Plus.

It began retailing in South Island supermarkets around three-and-a-half years ago and launched on the North Island six months later.

It's not easy.

"The New Zealand space is a bit of a tricky one," Thomas said.

"There is no high-quality, New Zealand-made premium pet food in the supermarket. There's a great big gap there, and no one is playing," he said.

"I have a feeling that people don't understand or particularly look for that type of product in the supermarket aisle."

Not only that, Omega Plus is a very small brand, up against products from the likes of Nestle and Mars.

"We have been kept a bit peripheral - bottom position on shelves. It's very, very hard to make headway."

It's a key market, however, with 80 per cent of New Zealand pet food sales going through supermarkets in a trade worth about $480 million a year.

"We continue to beaver away looking to build distribution and ranging," he said.

Simon Thomas, divisional manager for Omega Innovations. Photo / Supplied

King Salmon isn't the only listed New Zealand company with exposure to pet food. Ebos Group is also expanding, having snapped up assets like Black Hawk and Vitapet, Animates and Masterpet.

While pet food is only a small part of King Salmon, it's growing. In the year ended June 30, unit sales of Omega Plus dog food increased by 54 per cent; cat food unit sales grew by 219 per cent off a low base.

Total company revenue was $172.6m, of which pet food sales were about $1.2m, Thomas said.

Omega Plus, however, isn't just feeding New Zealand cats and dogs.

"We started looking further afield to find markets of interest and China was a big spot on the radar," he said.

The more than US$2 billion ($3.2b) Chinese pet food market is tipped to grow about 10 per cent annually according to different estimates. About half is sold online.

"The growth is just off the charts, but we had to proceed quite carefully," Thomas said. "The road to China is littered with the corpses of dead businesses that haven't quite made it."

The company spent about 18 months researching the market and launched in China in May on the e-store Boquii.com.

"Demand has been very strong," said Thomas. The firm currently ships a 40-foot container every six weeks, which is approximately 1,000 cartons of treats plus canned cat food and salmon oil.

"Our forecast for FY21 is a big step up on this year. As long as market access remains semi stable, we a looking to double our supply into China. We have new product development planned for this market and will look to double down in the China market," he said.

As in New Zealand, Omega Plus is competing against major brands in China. Still, New Zealand product has a significant advantage on food safety and market access.

"We are expensive to produce, we are a long way away, but we have very good quality raw materials," he said.

So far covid-19 isn't hurting either. Thomas said containers were delayed by seven to 10 days but were getting in. Also, online shopping has surged.

"More people, more traffic is being driven to where we are positioned," he said.

He also has his eye on other markets, in particular the US and Australia, but growth has to be sustainable.

"We don't want to bite off more than we can chew. We want to keep our foot down on the accelerator in China and meet demand."